## Facts

- Crown Battery Manufacturing Company (Crown) manufactured batteries; Club Car, Inc. (Club Car) manufactured electric golf carts that used batteries with an on-board charging (OBC) system.
- The parties entered into a written supply-related agreement setting specifications and commercial terms that would apply if Club Car chose to purchase batteries from Crown.
- The agreement stated that Crown would be capable of manufacturing at least 12,000 batteries per week.
- The agreement did not include a minimum-purchase term and did not state that Club Car would buy exclusively from Crown.
- Instead of obligating Club Car to purchase, the agreement gave Club Car a right of first refusal tied to Crown’s battery sales opportunities (i.e., an option to buy on stated terms before Crown sold elsewhere).
- As the relationship continued, customer complaints arose about golf-cart performance and alleged battery failures.
- Club Car attributed the problems to defects in Crown’s batteries and informed Crown that it would stop purchasing Crown batteries.
- Crown disputed that its batteries were the root cause and alleged that chronic problems with Club Car’s OBC system drove the failures and that Club Car shifted blame to battery suppliers.
- The parties’ dealings included a defined process for evaluating alleged battery failures, including a Battery Test Sheet created by Club Car and approved by Crown, described as the exclusive measure for whether a battery had “failed.”
- Crown sued for breach of contract and related relief. Club Car moved for partial summary judgment on specific contract theories.

## Issues

1. Whether the parties’ agreement was a U.C.C. requirements (or output) contract that obligated Club Car to purchase its battery requirements from Crown.
2. Whether the parties’ contract documents made the Battery Test Sheet the controlling and exclusive standard for determining battery failure, limiting contract theories inconsistent with that standard.
3. Whether genuine disputes of material fact remained on contract-performance and causation questions (including batteries versus the OBC system) such that some breach-of-contract theories could not be resolved on summary judgment.

## Decision

- The court granted Club Car’s motion for partial summary judgment in part and denied it in part.
- The court held the agreement was not a U.C.C. requirements (or output) contract because it contained no purchase commitment by Club Car to buy any quantity, to buy exclusively, or to buy its good-faith requirements from Crown.
- The court held the right-of-first-refusal provision did not create a duty for Club Car to purchase batteries; it provided an option if Club Car elected to buy.
- The court treated the parties’ agreed testing framework—using the Battery Test Sheet as the exclusive criterion for battery failure—as contractually controlling, and it rejected breach theories that depended on alternative failure standards.
- The court denied summary judgment on other contract issues where the record showed fact disputes, including disputes about whether Club Car followed the agreed testing/warranty process and disputes about whether the batteries or Club Car’s OBC system caused the reported failures.

## Legal Principles

- A U.C.C. requirements (or output) contract supplies quantity by reference to requirements or output only when the buyer (or seller) commits to that measure in good faith; without a commitment to buy requirements (or sell output), there is no enforceable requirements/output obligation.
- A right of first refusal is an opportunity to purchase on specified terms if a contemplated transaction occurs; it does not, by itself, impose a present duty to buy any quantity.
- Clear contract language allocating a specific, exclusive method for determining product failure governs the parties’ warranty and breach claims; a party cannot avoid that allocation by substituting different criteria.
- On summary judgment, a court may resolve contract claims where the contract terms foreclose the asserted duty as a matter of law, but must leave claims for trial when material facts about performance, compliance with agreed procedures, or causation are genuinely disputed.

## Conclusion

The court ruled that Crown could not treat the parties’ agreement as a U.C.C. requirements/output contract because Club Car never promised to purchase any quantity or exclusively from Crown, and the right of first refusal did not create a purchase obligation; however, the court allowed other contract disputes to proceed where the parties’ agreed battery-testing and warranty framework, and contested facts about testing, performance, and causation, prevented a complete summary resolution.


Crown Battery Mfg. Co. v. Club Car, Inc., 2014 WL 587142 (2014)